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Office of the Chief Economist Office of the Chief Economist 1
Robert Johansson
Chief Economist
U.S. Department of Agriculture
September 26, 2019
2019 Agricultural Outlook
Office of the Chief Economist
3.00
3.50
4.00
4.50
5.00
5.50
2015 2016 2017 2018 2019 2020 2021 2022
October 2018 forecast
April 2019 forecast
July 2019 update (only through2020)
Percent change
Growth forecasts less optimistic --- global purchasing power falls by $1.7 trillion (cumulative from 2019 – 2022)
Data: IMF
3.00
3.50
4.00
4.50
5.00
5.50
2015 2016 2017 2018 2019 2020 2021 2022
October 2018 forecast
April 2019 forecast
July 2019 update (only through2020)
Percent change World GDP Emerging Markets and Developing
Countries
2
Office of the Chief Economist
Dollar mostly higher year-over-year, but mixed over the last few months
Data: Thomson Reuters Datastream
-7%
-3%
-2%
0%
1%
2%
3%
4%
5%
6%
-10% -5% 0% 5% 10%
Russia ruble
Japan yen
Brazil real
Taiwan dollar
Canadian dollar
Mexico peso
China yuan
Australia dollar
Korea won
Eurozone euro
Argentina peso
US$ appreciation over last 12 months
46%
3
Since March 1
44%
3%
6%
4%
6%
1%
0%
0%
9%
-3%
-3%
3
Office of the Chief Economist Office of the Chief Economist 4
Office of the Chief Economist
Summary Recent trends and policies have generally led to falling food prices and growth in trade
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
200000
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
1960 1970 1980 1990 2000 2010 2020
Corn Oilseed, Soybean
Global corn and soybean exports (1000 mt)
Data: USDA http://www.amis-outlook.org/indicators/prices/en/
5
Office of the Chief Economist
Real prices trend down, as crop production outstrips demand
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0
100
200
300
400
500
600
700
800
1960 1970 1980 1990 2000 2010 2020
Real Crop Prices
Corn
Soybeans
Rice
Wheat
2005 = 100
0
30
60
90
120
150
180
210
240
1960 1970 1980 1990 2000 2010 2020
World Crop Production
Corn
Soybeans
Rice
Wheat
Data: USDA, BLS
2005=100
Corn price down 59%
since 1960, soybeans by
52%, rice by 70%, and
wheat by 65%.
Corn output has risen 435% since
1960, soybeans by 1,190%, rice by
225%, and wheat by 215%.
Office of the Chief Economist
U.S. and global crop outlook
7
Office of the Chief Economist
On the other hand, soybean progress is far behind the 5-year average.
16 days behind on
average nationally
Data: USDA
8
Office of the Chief Economist
And Corn progress is well behind the 5-year average.
12 days behind on
average nationally
Data: USDA
9
Office of the Chief Economist
Crop $/MT 2019F %∆ (YoY)
Soybeans 312 0.0%
Corn 142 0.0%
All Rice 291 +10.0%
Wheat 176 -7.0%
Cotton 1278 -17.7%
Data: USDA
5 year low 2019F 5 Year high
Higher corn and rice prices forecast, while wheat and cotton are lower
10
Office of the Chief Economist
Crop 2019F
(mil. hectares) %∆ (YoY)
Corn 36.4 +1.0%
Soybeans 31.0 -14.0%
Wheat 18.5 -4.6%
All cotton 5.6 -2.4%
Rice 1.0 -13.9%
Data: USDA
Corn acreage forecast slightly up, other crops lower
5 year low 2019F 5 Year high
11
Office of the Chief Economist
Global 2019/20 production and consumption at near-record or record highs
300
400
500
600
700
800
MMT
Production
Consumption
Wheat
300
400
500
600
700
800
900
1,000
1,100
1,200
MMT
Production
Consumption
Corn
0
50
100
150
200
250
300
350
400
MMT
Production
Consumption
Soybeans
12
Source: USDA, World Agricultural Supply and Demand Estimates, September 12, 2019
Office of the Chief Economist
Global stocks in days of use: tightening market for corn and soybeans next year, but wheat and rice stocks remain high
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60
80
100
120
140
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Days of use
Wheat
Corn
Rice
Soybeans
Source: World Agricultural Supply and Demand Estimates, September 12, 2019
13
Office of the Chief Economist
China’s ending stocks as a share of global ending stocks
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0
20
40
60
80
0
20
40
60
80
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Percent Percent Wheat
Corn
Soybeans
Cotton
Rice
Source: USDA, World Agricultural Supply and Demand Estimates, September 12, 2019
Office of the Chief Economist
U.S. and Indian Cotton Production Projected Up in 2019/20
Source: World Agricultural Supply and Demand Estimates, September 12, 2019
15
Office of the Chief Economist 16
U.S. and global livestock outlook
Office of the Chief Economist
5 year low 2020F 5 Year high Livestock 2020F ($/MT) %∆ (YoY)
Steers 2535 +1.3%
Hogs 1301 +19.2%
Broilers 2028 +5.7%
Milk 416 +2.7%
Data: USDA
Low prices for U.S. steers; stronger hog and milk prices
17
Office of the Chief Economist
Item 2020F
(MMTs) %∆ (YoY)
Beef 12.6 +2.6%
Pork 12.9 +2.9%
Broilers 19.7 +1.2%
Total1 48.2 +2.1%
Milk 100.3 +1.5%
Data: USDA
U.S. meat and milk production to be record high in 2020
5 year low 2020F 5 Year high
18
1Total red meat and poultry
Office of the Chief Economist
Continued Growth in India Milk Production in 2019
19
0
20
40
60
80
100
120
140
160
180
200
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Cows Buffalo
Million metric tons
Source: USDA.
Office of the Chief Economist
Outlook to 2028
20
Office of the Chief Economist
Several world events potentially setting the stage for impacting projections --- trade disruptions, African Swine Fever, poor weather
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
-
20
40
60
80
100
120
140
160
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9F
202
0F
Canada Mexico China Other % of China Share
Billion dollars
US exports to China down ~$18 from 2015 July 2019: 152 confirmed cases in China (all provinces), spread
through Vietnam, Cambodia, Laos, Mongolia, and North Korea
Sept 2019: Philippines confirms first case (not reflected in map)
Last week South Korea confirmed its first case (not reflected in
map) Data: USDA
21
Office of the Chief Economist
Global crop and meat trade projected to increase
22
0
25
50
75
100
125
150
175
200
225
250
275
300
325
1990 1995 2000 2005 2010 2015 2020 2028
Soybeans and soybean products 1
Wheat
Million metric tons
0
2
4
6
8
10
12
14
16
18
1990 1995 2000 2005 2010 2015 2020 2028
Poultry
Pork
Million metric tons
Source: USDA. Meat trade is major exporters, not world total.
Office of the Chief Economist
Global demand drives growth in U.S. livestock and dairy exports
Data: USDA
-
2.0
4.0
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
Mil
lio
n o
f m
etr
ic t
on
s
Beef Pork Chicken
0
5
10
15
20
25
30
2000
2002
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2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
Mil
lio
n o
f M
etr
ic t
on
s
Dairy, Fat-Basis
Dairy, Skim Solids-Basis
23
Office of the Chief Economist
Data: USDA
… and drives growth in U.S. feed grain exports
Million metric tons Million metric tons
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-
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-
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80199
6/9
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9/0
0
200
0/0
1
200
1/0
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2/0
3
200
3/0
4
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4/0
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200
5/0
6
20
06
/07
200
7/0
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8/0
9
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201
0/1
1
201
1/1
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2/1
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/17
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1
202
1/2
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202
2/2
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202
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5
202
5/2
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202
6/2
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202
7/2
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202
8/2
9
Corn Wheat Soybeans
Office of the Chief Economist
Projections for India’s beef production are tempered compared to previous years
0
1
2
3
4
5
6
7
Mil
lio
n m
etr
ic t
on
s
2013
2014
2015
2016
2017
2018
2019
Actual
25
Office of the Chief Economist
India’s wheat production to grow steadily over the next ten years
60
70
80
90
100
110
120
2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027
Mil
lio
n m
etr
ic t
on
s
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Actual
26
Office of the Chief Economist
India’s rice production is projected to maintain rapid expansion
80
85
90
95
100
105
110
115
120
125
2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027
Mil
lio
n m
etr
ic t
on
s
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Actual
27
Office of the Chief Economist
U.S. farm sector and
policy
28
Office of the Chief Economist
Real net farm income is projected to fall
0
20
40
60
80
100
120
140
0
20
40
60
80
100
120
140
200
5
20
06
200
7
200
8
200
9
201
0
201
1
201
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201
3
201
4
201
5
201
6
20
17
201
8
201
9
202
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202
1
202
2
202
3
202
4
202
5
202
6
202
7
202
8
Billion dollars Billion dollars
Nominal Net Farm Income
Real Net Farm Income (2009$)
Data: USDA-ERS
29
Office of the Chief Economist
$0
$100
$200
$300
$400
$500
$600
Billion dollars
Direct government
payments
Crop insurance indemnities
Farm-related income
Crop cash receipts
Animal & animal products cash receipts
Government payments make up only a small share of farm gross cash income
Data: USDA-ERS
30
Office of the Chief Economist Office of the Chief Economist 31
Office of the Chief Economist
Farm Policy
32
Office of the Chief Economist
19th to early 20th century: Expansion, scientific agriculture, and market development
• Land distribution and infrastructure
development--to encourage settlement
and markets
• Science and education—research,
education and extension to improve
farming and farm life
• Information, credit, and marketing—to
assist farmers’ participation in changing
economy
33
Office of the Chief Economist
20th-21st century: Productivity Impacts
• Securing post-war prosperity • High price supports
• Adjusting to explosive
productivity gains • Adjust price supports • Distribute surplus stocks • Increase acreage reductions
• Responding to globalization
• End price supports & acreage controls
• Move toward risk management
34
Office of the Chief Economist
…culminate in greater focus on risk management…
Decoupled payments replace target prices and deficiency payments
Planting flexibility replaces acreage and marketing controls
Crop insurance program expanded
$0
$20
$40
$60
$80
$100
$120
$140
0
50
100
150
200
250
300
350
400
19
94
19
96
19
98
20
00
20
02
20
04
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06
20
08
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10
20
12
20
14
20
16
20
18
Billio
n d
olla
rs M
illio
n a
cre
ss
Insured acreage (left axis)
Liability (right axis)
Data: USDA-RMA
35
Office of the Chief Economist
2018 Farm Bill: 4 titles dominate projected outlays
Nutrition ($326 billion)
Crop Insurance ($38 billion)
Commodity Policy ($31.4 billion)
Conservation ($29.3 billion)
Other ($3.5 billion)
Trade
Credit
Rural Development
Research, Extension, and Related Matters
Forestry
Energy
Horticulture
Miscellaneous
5-yr total = $428 billion
Data: CBO 2018 Farm Bill score.
Nutrition 76%
Crop Insurance 9%
Commodity Programs
7%
Conservation 7%
Other 1%
2018 Farm Bill Outlays: 2019-2023
36
Office of the Chief Economist
But farm policy has also responded to unexpected conditions…
37
https://oceanservice.noaa.gov/news/historical-hurricanes/
https://www.dtnpf.com/agriculture/web/ag/equipment/article/2018/09/04/farmers-typically-sell-soybeans-may
Office of the Chief Economist
0
5
10
15
20
25
30
35
40
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1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019f
Bill
ion
do
llars
Coupled
Partially decoupled
Decoupled
Emergency
Conservation
Crop insurance
Data: USDA, fiscal year.
Characteristics of US farm programs changing over time; crop insurance increasing in importance
MFP1.0
10-year average = $18.7 billion per year
--- $6.2 billion from crop insurance
WHIP1.0
38
Office of the Chief Economist
WASDE: World Agricultural Supply and Demand
Estimates (Next WASDE Oct. 10)
Secretary's WASDE Briefing Slides
FAS: World Agricultural Production
Weekly Weather and Crop Bulletin
Links to the latest WASDE related publications
USDA/NASS Crop Progress Report
USDA Agricultural Projections to 2028
39